Prime Minister Malcolm Trumpbull has delivered a new attack on the Labor Party’s taxation policies, claiming that they will raise the tax burden on ordinary Australians by $164 billion over the medium-term. From The West Australian:
In a sign of how Mr Turnbull is planning to use the coming Budget to paint Labor as a high-taxing threat to the economy, analysis by Mr Turnbull’s office says a string of ALP measures will drive up overall tax collections.
Labor has outlined tax policies including changes to negative gearing, a $3000 cap on how much a person can claim on their tax return for the cost of accountants and keeping the Budget repair levy on people who earn more than $180,000 a year.
The Government claims these and other measures will result in Labor raising an extra $164 billion in revenue over the medium term…
Mr Turnbull, whose signature plan of a company tax cut for all firms by the middle of next decade faces defeat in the Senate, has promised to use the May Budget to also deliver income-tax relief to middle-income earners.
Recent figures suggest the Budget bottom line is improving on the back of better tax collections from the corporate sector, though it is still expected to show a deficit of about $20 billion in the coming financial year.
Righto, so lets quickly assess each of the above mentioned tax measures.
First, Labor’s negative gearing and capital gains tax policy is unambiguously good policy. As revealed by Treasury last month, Labor’s policy would shift the “composition of ownership… away from domestic investors”, and would save the Budget some $3.4 to $3.9 billion per year. The Treasury also noted that “negative gearing benefits high income families”.
A new study prepared on behalf of the Reserve Bank of Australia has also shown that axing negative gearing would significantly boost Australia’s home ownership rate, and would raise societal welfare by far more than the Coalition’s policy to cut the company tax rate.
Second, the $3,000 cap on how much a person can claim on their tax return for the cost of accountants would obviously have zero impact on ordinary Australians, but would limit rorting by high income earners that heavily use tax agents to minimise tax. Again, very good policy.
Finally, keeping the Budget repair levy on people who earn more than $180,000 a year is neither inherently good nor bad. Sure, it’s bad for high income earners, but it will have minimal impact on the overwhelming majority of taxpayers, and will also help to close the Budget deficit.
This last point is important: presumably Trumpbull still believes that the Budget deficit needs to be closed, in which case Labor’s policies are fiscally responsible? Labor’s policies are certainly wiser than Trumpbull’s plan to cut the company tax rate (costing $4 to $8 billion a year), as well as lavishing personal income tax cuts – all built around a temporary spike in Budget revenue from the commodity price rebound.
What ever happened to the Coalition’s ‘fiscal conservatism’?
